One of Australia’s largest employer groups, Australian Industry Group (AI Group) has backed calls by industry funds for the substantial retention of default funds status quo, arguing that employers will be reluctant to push employees to make superannuation choices.
In its submission to the Productivity Commission (PC) inquiry into alternative default models, AI Group said employers would be reluctant to be seen as pushing employees to make an active choice for a variety of reasons, including being seen to give financial advice.
“They could see themselves at risk of breaching prohibitions against the provision of financial advice; they could fear legal action if, after urging an employee to make a choice, the employee felt they had been directed to a poorly-performing fund,” the submission said.
It also claimed employers might not want to incur the costs of researching on behalf of the employee.
The AI Group submission carried many of the same arguments contained in that of Australia’s largest superannuation fund, AustralianSuper, which argued for the retention of the Fair Work Commission in the selection of default funds and also injected an implied criticism of bank-owned superannuation funds and financial planners.
Dealing with the question of “integrity” as a criterion for the selection of particular default funds, the AustralianSuper submission said: “Integrity can be measured by reasoned assessments of corporate culture, how incentive systems are aligned to sales and behaviour, and whether there is pressure to return a profit to shareholders at the expense of returns to members”.
The AustralianSuper submission also claimed that the MySuper regime was flawed in its ability to protect members, because the MySuper licensing regime had no direct filter to prevent long-term low performing funds from becoming default funds, or ceasing to be default funds.
